PENJANA to help kick start economic recovery

• Short-term economic recovery plan worth RM35bn announced

• Fiscal deficit target to increase to around 6.0%

• Focusing on the next and the beyond

• SMEs and micro enterprises are the main focus of the fourth stimulus package

• Economy to recover gradually in 2H20

The Malaysia government announced RM35bn Short-Term Economic Recovery Plan or Pelan Jana Semula Ekonomi Negara (PENJANA) to help kick-start the recovery stage of the country’s economy amid the Covid-19 pandemic. The recovery plan was developed around the broad themes of empowering people, propelling businesses, and stimulating the economy. PENJANA saw additional measures to support small and medium-sized enterprises (SMEs) and the rakyat, especially vulnerable groups and the B40. These include the extension of the Wage Subsidy Programme and additional financing measures.

Back in May this year, the Malaysian government has put in place a six-step plan or 6R to address the impact of Covid-19.

This Short-term Economic Recovery Plan or PENJANA is the fourth of the 6Rs in addressing the impact of Covid-19. As many as 40 initiatives were announced involving RM35bn, out of which RM10bn will be direct from government funds. This was a top up to the earlier Prihatin Stimulus Package of about RM260bn. In total, the stimulus measures introduced have now reached RM295bn, with the government vowing to directly inject RM45bn of that into the economy, mostly raised through domestic borrowings.

Fiscal deficit target to increase to around 6.0%. According to Finance Minister, with the additional RM10bn fiscal injection, the country’s fiscal deficit target will be revised higher to around 6.0% of GDP from 4.7% previously. This would be its largest fiscal deficit since GFC 2009 when it was at 6.7%. The minister also said that said there is no immediate need for the central bank to cut its benchmark interest rate further from its decade low of 2%, "given the liquidity in the country and given where the currency is going and where we are we as an economy".

Source: BIMB Securities Research - 9 Jun 2020